Project Freedom (3): Why and How Successful Traders CAN Keep Making Profits from the Market

Let's start by reviewing an old fable: “The Mathematician and the King”

Once upon a time there was a mathematician invented a chess game for a king.  The king was so happy about it and told the mathematician to name his reward.

“I don’t ask for much,” said the clever mathematician. “A single grain of wheat on the first square on the chess board, two grains of wheat on the second square, and double the number of wheat in every subsequent square….”

“So it shall be done,” said the king, who was not having any idea about the concept of exponential growth.

After the King got his men to work out the numbers, he was shocked that before reaching half of the complete chess board, the number had become bigger than total annual wheat production in his whole Kingdom.

The moral of the story is: TWO CONDITIONS are required to grow Rich. It takes both the “TIME” and “EDGE” to increase the number through exponential growth.

Now, let's see how these concept apply to trading:

* TIME: Every move to the subsequent square represents the “Time” required in the game. Adding all the individual step, short term, together become a long term. 


* EDGE: In the story, it has an “Edge” in doubling every next step. Similar to say that as long as there is a CONSISTENT edge, it would grow over time. The stronger the edge (Percentage growth over a fixed period of time) the faster the number grow, and Back Testing the system would help to identify which "Edge" is better.


Just like the house of any Casinos, as long as there are enough customers keep playing the game, they can keep making money because there are “Edges” built into all games by designed, though these edges may be very small in percentage in terms of winning probability bias towards the house.

(-> Here is a good article illustrating the Edage of a casino.  <-)

So...

When one can workout a consistent "EDGE" and keep himself continuously participate in the market... It is like, he is operating an online Casino by himself.

Of course, the "edge" must be much stronger than many other devaluation factors to be meaningful edge, such as "Inflation","currency devaluation","Tax", etc.This link has a picture to show how serious inflation could be over time:

http://blessedfool.blogspot.sg/2012/01/personal-finance-8-where-have-all-money.html

The moment when a trader is able to change from the state

of "understand the principle of probability" to the

state of "thinking in probability mind set",

he changes his world.
- Mark Douglas - "Trading in the Zone"

Personal Finance (8): Where Have All the Moneys Gone?!

(Click on the chart to Zoom-in)

In the above diagram:
1) The upper pane is the price chart shows a long term monthly chart of S&P500 ETF (SPY) for the past 19 years. 

2) The middle pane  shows that DEVALUATION of currency due to INFLATION. The Back/Blue/Green/Red color are representing 0,-3,-5 and -10 percent per year respectively.

3)  The lower pane shows the inflation adjusted value of the S&P500 Index.  Now, when factor in devaluation rate of  0,-3,-5 and -10 percent per year due to inflation, the number is more realistic in reflecting the "actual value" after all these years of investment.

Consider the annual inflation rate as of today, and think about how this FACT would affect your retirement plan (if you already have one).
For those people who simply look at their bank account balance without factor in the devaluation due to inflation could be having a shock at a later date.


So, after many decades of world peace since the end of WWII... 
After chopping down so many forests...
After using up about half of the total crude oil on earth...
After polluting so much rivers/air/environment under the name of development...
At the end: Where have all the moneys gone??!!

May be this song will give you some inspiration to find out.

Where have all the Moneys gone?
Long time passing
Where have all the Moneys gone?
Long time ago
Where have all the Money gone?
Gone to ????? every cent
When will we ever learn?
When will we ever learn?

->Home<-

Project Freedom(2): In Search of the Heaven Sword and Dragon Sabre Indicators

“武林至尊，宝刀屠龙，号令天下，莫敢不从，

倚天不出，谁与争锋。” 
-- 金庸小说《倚天屠龙记》

Above is a phrase from Jin Yong's famous novel The Heaven Sword and Dragon Sabre.

It may be translated as follows: "The precioius Dragon Slaying Sabre is the most Honourable Weapon in the Martial Art Community.  It commands the world and no one dares to disobey!  Who else dare to challenge it unless the re-appearance of the Heaven Reliant Sword?"

The story background was set in the late Yuan Dynasty, and it revolves around a pair of extremely powerful weapons as named by the novel.  Of course, one can imagine that all the people want to own one of these weapons, and some went to the extreme, by hook or by crook, in order to get it.   Almost all Chinese spoken people know more or less about this story as it been flimed into movies and TV series for about ten times since the last 3 decades.

Dragon Sabre

There is a saying, "人生如戏 戏如人生", "A Life is just like a Movie, A Movie is just like a Life."  So True!
From personal experience and what I read from the trading forums...  Most system developers are in their journey in search of such powerful indicator(s), and the west call it the Holy Grail Indicator.

Many people in the forums claimed that they don't believe that there is such thing, yet keep on discussing and debating about it... Having told some stories...
The following are some good reasearch sites for indicators/systems, and some indicators used to be sold for  a couple of hundred USD (bought a couple before ) and are now for free:

1) MetaStock Zone (Link updated and tested working on 13 Feb 2014)

2) EasyLanguge Zone

3) WealthLab Public Chart Scripts

4) Amibroker AFL in WiseStock Trader

5) Trader Tips from TASC

My engineering view point is this: there is definitely no Holy Grail indicator, but there are Holy Grail systems which consist of multiple indicators working in harmony at the background.  In such system, each individual indicator would cover the shortcomings for other individual indicator , like a Master Mind Team, and make it works great.   Everyone has blind spots.  Cannot see it don't mean it is not there.

"Nothing great was ever achieved

without enthusiasm."

- Ralph Waldo Emerson

...  to be continue ...

Self Development Idea (13) - Two Worlds of Reality, and the Magic Mirror

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Everyone of us is simultaneously living in two worlds of reality. One is the "Inside world", and the other is the "Outside world".

In the Inside world, it is yourself consist of "Philosophy, Thoughts, Feelings, Emotions, and Attitudes."

In the Outside world, it is your Environment of "People, Place, Things, Events and full of Public Opinions."

And, in between the two worlds, there is a Magic Mirror.
This mirror has the ability to reflect the reality from one side to the other side...


Note: A summary note taken from reading the book "Mind Power by John Kehoe"
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Take for example.

If the person has a stronger faith in his own Internal World, he is able to eventually project it into the Outside World through the help of his own subconscious mind.

On the other hand, the other case is true also, for a person who does not set any goal or does not has any belief of faith that he can make a difference... The Outside World would keep telling him that this is wrong and that is bad ... Eventually, this would reflect into the person Internal World. Which would create stress and harmful to the body.

So. It is a better deal to choose to be happy and have peace of mind, rather than let the Outside World to dictate what they want you to be.

Many may have read that popular phrase "Your are what you think you are...".  Well, that is over simplified and not accurate. A sage puts it, "We aren't what we think we are, but what WE THINK,  WE ARE!"

"All mankind's inner feelings eventually manifest

themselves as an outer reality."

— Stuart Wilde